Experts and economists divided on honeymoon rates

Experts and economists in Finder.com.au's RBA survey were divided when asked about honeymoon rates.

The temporary low rates on home loans split opinion.

Just over 40 percent said honeymoon rates were bad for borrowers, with the majority of this group indicating such offers encourage customers to take on more debt than they can afford.

The same amount of respondents to the survey felt honeymoon rates were good for consumers, with the majority favouring cost savings.

The remaining 20 percent were on the fence about introductory rates, including Mark Crosby from Monash University.

“It depends whether borrowers have the capacity to make additional repayments in these early years," Crosby said.

"If so [honeymoon rate loans] are a very good deal."

Finder.com.au insights manager Graham Cooke said honeymoon rates can be useful for borrowers as long as they understood the terms involved.

“Often the honeymoon rate is one percentage point below the standard rate, which is why honeymoon rates can be suitable for first home buyers looking to keep their repayments down within the introductory period.

“Honeymoon rates can be a great way for first home buyers to get a foot on the ladder, but they need to be prepared for higher interest costs once the temporary rate expires.

“As we expect some rate rises over the next two years, borrowers need to be comfortable with paying a rate that’s at least two percentage points higher than the current revert rate,” he said.